BNY Mellon Sued Over Pension Funds - Analyst Blog
August 15 2011 - 9:15AM
Zacks
The Bank of New York Mellon Corporation (BK)
has been accused by the states of Virginia and Florida of failing
to provide them with the best possible prices while making foreign
currency trades for their respective state pension funds. The two
states are acting on 2009 whistleblower lawsuits filed by FX
Analytics against the company.
The two states have filed a lawsuit against BNY Mellon for
overcharging the pension funds – Florida Retirement System Trust
Fund and Virginia Retirement System – on foreign currency
transactions.
As of June 30, 2011, BNY Mellon held about $128.9 million worth
of funds in Florida Retirement System Trust Fund, while as of March
31, 2011, the company held nearly $54.3 million in Virginia
Retirement System.
Florida alleged that BNY Mellon violated the False Claims Act by
submitting fake claims for payments and fraudulent documents in
support of these claims. Further, the company is also accused of
using forged records to evade payment obligations to the state. In
its lawsuit, Florida is seeking $11,000 in penalties for each
violation of the False Claims Act.
Similarly, Virginia, in its complaint filed with the court,
accused BNY Mellon of charging the pension fund with the highest
price of the trading day instead of the actual interbank rate at
which the currencies were actually purchased. The state is seeking
a total of nearly $931.6 million (nearly $120 million in damages
and $11,000 in fines for each of 73,784 falsely reported executed
trades) from the company as compensation.
BNY Mellon is not the only company that has been accused by the
states of overcharging the pension funds. In 2009, the state of
California had alleged that State Street Corp.
(STT) had improperly priced foreign exchange for California pension
funds.
However, BNY Mellon stated that these cases are needless and
based on flawed understanding and working of the foreign currency
markets. The company also stated that it would fight these lawsuits
and win them on the basis of facts and law.
BNY Mellon currently retains its Zacks #5 Rank, which translates
to a short-term Strong Sell rating. However, in the absence of any
significant positive or negative catalyst, we maintain a long-term
Neutral recommendation on the stock.
BANK OF NY MELL (BK): Free Stock Analysis Report
STATE ST CORP (STT): Free Stock Analysis Report
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